In This Issue...

Federal
Credit Program

U.S. DOT Closes $967 Million in TIFIA Loans in Texas and Nevada

On June 28, 2002, the U.S. Department of Transportation (U.S. DOT) and
the City of Reno, Nevada executed the first of three Transportation Infrastructure
Finance and Innovation Act (TIFIA) loan agreements for the Reno Transportation
Rail Access Corridor (ReTRAC). When complete in 2006, the $283 million project
will feature a below-grade, 2.25-mile rail corridor through downtown Reno
with two mainline tracks, an access road, and an Amtrak station stop. Bridges
over the corridor will replace 10 at-grade rail crossings. Rail service will
remain uninterrupted during construction via a temporary "shoofly" track
built as part of the project.

The $50.5 million loan closed in conjunction with the City's issuance of
$114.2 million in senior project bonds. Revenues from a county sales tax
and a downtown hotel tax secure both the senior bonds and the TIFIA loan.
This represents the first public issuance of senior securities with subordinated
TIFIA debt as well as the first time TIFIA has participated with a major
bond insurer. Up to $23 million of additional TIFIA credit assistance will
be provided via two loans to be negotiated in the coming months.

On July 25, 2002, the U.S. DOT and the Texas Transportation Commission
(TTC) executed a $917 million loan to support the $3.6 billion "first
phase" of the Central Texas Turnpike Project. The Turnpike is composed
of three distinct elements: Loop 1, a 3.5-mile north-south route in the Austin
vicinity; State Highway (SH) 45 North, a 13.2-mile highway connecting Austin,
Round Rock, and Pflugerville; and the northern segment of SH 130, a 49-mile
eastern bypass of Austin's congested Interstate 35.

The Texas Turnpike Authority Division of the Texas Department of Transportation
(TxDOT) is managing the project. Loop 1 and SH 45 will be constructed using
the traditional design-bid-build process, while SH 130 is under an exclusive
development agreement with Lone Star Infrastructure. The Turnpike will be
completed in segments, with the final segment open to traffic in December
2007.

In conjunction with the TIFIA loan, the TTC issued $1.2 billion in revenue
bonds and $900 million in Bond Anticipation Notes (BANs). Turnpike toll revenues
will secure both the senior bonds and the subordinate TIFIA debt. The remainder
of the project will be financed through TxDOT grants and contributions of
right-of-way by the surrounding jurisdictions.

TTC expects to use about $17 million of the TIFIA loan proceeds to fund
project construction costs, with the balance allocated to retiring the BANs
if cost effective.

Contact: Mark Sullivan, TIFIA JPO, 202/366-5785.

TIFIA Credit Assistance Available

Over the FY 1999-2003 period, the Transportation Equity Act for the 21st
Century (TEA-21) authorized TIFIA credit support of $10.6 billion to directly
assist major surface transportation projects. To date, the TIFIA program
has committed $3.5 billion of credit assistance to 10 projects representing
$15 billion in transportation infrastructure investment, at a budgetary cost
to the Federal Government of only $183 million. Up to $2.6 billion in credit
assistance will be available in FY 2003. Under its "rolling" application
process, the TIFIA program will accept letters of interest from potential
applicants at any time.

Contact: Max Inman, FHWA, 202/366-2853.

TIFIA Report to Congress Available

On Friday, June 7, 2002, the U.S. DOT delivered a Report to Congress regarding
the TIFIA Credit Program. The report fulfills the Congressional requirement
to summarize, within four years of the June 9, 1998 enactment of TEA-21,
the financial performance of projects assisted by TIFIA and to discuss alternatives
for achieving the program objectives in the future. The 42-page report reviews
the policy objectives of TIFIA and implementation of the program by the U.S.
DOT. It analyzes the TIFIA project portfolio in terms of modal, geographic,
and financial diversity. The report reviews current TIFIA project commitments
in light of the program's stated objectives and additional benefits identified
by project sponsors. The report also includes a discussion of credit issues
encountered during loan negotiations. Finally, as directed by Congress, the
report reviews alternatives for the TIFIA program administration: continuing
the program under the U.S. DOT, establishing a government corporation or
government-sponsored enterprise, or phasing out the program and relying on
the capital markets.

TIFIA Loan Servicing System Launched

The speeches have been given, the ribbons have been cut, and the crowds
have gone home. Another project is up and running. Now what?

With a typical maturity of 35 years, a TIFIA loan creates a long-term relationship
between lender and borrower. Well after agreements are executed, funds disbursed,
and projects constructed, ongoing fiduciary responsibilities remain. Through
the loan servicing function, the TIFIA credit program not only collects and
records loan repayments but also generates management, budget, and accounting
information. The U.S. DOT selected the firm of Riggs & Co. to develop
and maintain a comprehensive system for TIFIA credit accounting, collections,
and financial reporting.

Earlier this year, Riggs completed the first phase of a loan servicing
system featuring extensive capabilities and flexibility to meet TIFIA-specific
requirements, government-wide financial guidance, and changing management
information needs.

Specifically, the TIFIA loan servicing system will:

Deliver real time information on TIFIA credit instruments for general
ledger accounting and management reports;

TIFIA Trivia

The U.S. DOT Responds to Your Questions

The "TIFIA Trivia" box provides responses to questions posed
by our readers and other observers. We hope you find this "TIFIA
Trivia" section useful and that you will submit questions to Mark
Sullivan, TIFIA JPO, 202/366-5785.

Question

The TIFIA statute requires that a project's senior debt be investment
grade. What are issues to be aware of?

Answer

The TIFIA application must include at least one preliminary credit
opinion letter, which must assess the project's overall viability (economic,
legal, financial), the potential for the senior debt to be investment
grade, and the default risk on the TIFIA instrument. This letter must
be current and must specifically address the applicant's TIFIA proposal - submission of a prior rating opinion is not acceptable.

Prior to closing the TIFIA agreement, the project sponsor must receive
at least one rating letter that assigns an investment grade rating
to the senior debt and assesses the default risk on the TIFIA instrument.

It is permissible for the TIFIA instrument to have a junior lien
on the same security (revenue stream) pledged to the senior debt. But
if the project debt is secured by multiple revenue sources of disparate
credit quality, then the U.S. DOT may require a pro rata sharing of
the high-quality revenues with other creditors, or a bifurcation of
the financing into two separate senior-subordinate flows.

When a subordinate TIFIA loan shares the same revenues pledged to
the senior debt, the par amount of such debt must be at least as large
as the TIFIA assistance. This requirement helps ensure that the senior
debt rating reflects a manageable overall risk profile for the project.

The U.S. DOT and the project sponsor must carefully examine and resolve
intercreditor issues during negotiation of agreements. If the applicant
already has an existing bond indenture, the U.S. DOT must determine whether
TIFIA requirements can be met by folding the TIFIA instrument into the
existing structure.

SIB Highlights

SIB Activity Tops $4 Billion

State Infrastructure Banks (SIBs) continue to be an important tool in the
transportation finance toolbox. As shown in the table to the right, 32 states
have entered into 297 SIB loan agreements with a dollar value of over $4.0
billion as of June 30, 2002. This represents growth in the value of loan
agreements of 40 percent over the past nine months.

The ability of states to maximize the potential of their SIBs to help finance
transportation investment needs can be enhanced through leveraging, which
refers to the issuance of bonds against a SIB's capitalization. This issue
of IFQ highlights the experience of South Carolina and Minnesota in leveraging
their SIBs to provide loan support to needed state transportation projects.

State Infrastructure Bank Loan Agreements by State
As of June 2002

State

Number of Agreements

Loan Agreement Amount ($000)

Disbursements
to Date
($000)

Alaska

1

$2,737

$2,737

Arizona

40

430,266

236,662

Arkansas

1

31

31

Colorado

2

400

400

Delaware

1

6,000

6,000

Florida

32

465,000

98,600

Indiana

1

3,000

1,122

Iowa

2

2,874

2,874

Maine

23

1,758

1,478

Michigan

23

17,034

13,033

Minnesota

15

95,719

41,000

Missouri

11

73,251

67,801

Nebraska

1

3,360

3,360

New Mexico

1

541

541

New York

2

12,000

12,000

North Carolina

1

1,575

1,575

North Dakota

2

3,565

1,565

Ohio

39

141,231

116,422

Oregon

12

17,471

17,471

Pennsylvania

23

17,403

17,403

Puerto Rico

1

15,000

15,000

Rhode Island

1

1,311

1,311

South Carolina

6

2,382,000

1,124,000

South Dakota

1

11,740

11,740

Tennessee

1

1,875

1,875

Texas

37

252,013

225,461

Utah

1

2,888

2,888

Vermont

3

1,023

1,000

Virginia

1

18,000

18,000

Washington

1

700

385

Wisconsin

3

1,814

1,814

Wyoming

8

77,977

42,441

Total

297

$4,061,517

$2,087,990

Leveraging Helps Maximize SIB Potential

With $4.0 billion in loan activity achieved by the nation's SIBs to date,
major strides have been made by states in implementing the SIB program and
increasing investment in transportation infrastructure. While the pace of
SIB implementation has been affected by insufficient capitalization - TEA-21
placed limitations on Federal capitalization, and the economic downturn has
affected the capacity of states to provide new infusions of capital to existing
SIBs - states have the opportunity to enhance SIB funding through leveraging.
Leveraging a revolving loan fund such as a SIB offers significant potential
for expanding the pool of projects that can be financed. Of the 32 states
participating in the SIB program today, two states - South Carolina and Minnesota - have issued bonds to leverage their SIBs. These states have taken different
approaches in structuring their programs, demonstrating the flexibility states
have in tailoring SIBs to meet state specific needs.

Expanding the Pie

The South Carolina Transportation Infrastructure Bank (SCTIB) is authorized
to issue bonds under the enabling legislation establishing the bank in 1997.
The SCTIB is a good example of a large, leveraged SIB. Since its inception,
the SCTIB has approved financing and begun development of over $3.0 billion
in projects. SCTIB loans are financing most of the costs of these projects.
The SCTIB has issued over $1.2 billion in revenue bonds to date to provide
funds for approved projects. Another $600 million in a mixture of general
obligation and revenue bonds is planned over the next two years to fund loan
disbursements. The leveraged SCTIB is helping to compress 27 years of road
and bridge projects into a seven-year acceleration program, known as "27
in 7."

Minnesota's SIB is a partnership between two state agencies with bonding
accomplished through a conduit agency. The Minnesota Public Facilities Authority
is responsible for bond issuance and the financial operations of the bank,
while the Minnesota DOT evaluates the technical merits of project applications.
Both highway and transit projects are eligible for assistance. Minnesota's
SIB, designated as the Transportation Revolving Loan Fund (TRLF), has been
capitalized with $35 million in Federal funds and $24 million in state funds.
These funds have been leveraged through two bond issues, totaling $37.6 million.
The first issue in 1999 in the amount of $17.1 million financed a loan to
the Metropolitan Council for transit-related improvements. Then in 2001 a
second issue for $20.5 million funded 11 project loans. Loan repayments are
pledged for debt service.

Insights from SRFs

As transportation agencies explore the potential of expanding SIBs through
leveraging, they also can look to the experience of states in financing environmental
infrastructure projects through State Revolving Funds (SRFs) the most widely
used model of revolving loan funds operating at the state level. The SRF
program, established in 1987, provides funding assistance to water pollution
abatement projects through Federal matching grants to capitalize SRFs.

One of the unique features of the SRF program is the capacity of states
to leverage their loan funds through the municipal bond market. States have
used one of two basic structures to leverage Federal capitalization grants
for wastewater and drinking water facilities: the Cash Flow Model or the
Reserve Fund Model. State law and program goals have been determining factors
in the choice of models. The diagrams to the right describe the two models.
Under the cash flow model, loans are funded from bond proceeds and capitalization
grants, while under the reserve fund model, Federal capitalization grants
and state matching monies are not used to make loans directly.

Leveraging has made a significant impact on SRF activity. As of the June
2001, 23 states have leveraged their wastewater funds, generating almost
double the loan dollar volume as the states, which have not leveraged funds.
As shown in the table below, bonds have added $10.1 billion to SRF funding.

Leveraging SIBs - The Cash Flow Method

Revenue bond proceeds are blended with capitalization funds to make loans
at subsidized rates and to provide debt service coverage. Debt service reserve
is funded from bond proceeds.

Leveraging SIBs - The Reserve Fund Model

All Federal and state capitalization grants/monies fund debt service reserve
that provides interest rate subsidy and serves as security for investors.

Looking to the Future

Recognizing that leveraging is a way to maximize the benefits of the SIB,
Ohio is moving forward with implementation of a leveraged SIB. Ohio's SIB
program was originally capitalized with $40 million in State General Revenue
funds and $120 million in Federal highway funds. Expansion of Ohio's SIB
program through bonds will provide additional capital for transportation
projects, enabling the state to accelerate construction and obtain both the
system and economic benefits sooner than otherwise would have been possible.
Bond proceeds are expected to be lent to political subdivisions with loans
averaging between $3 million and $10 million. The Ohio DOT will issue the
bonds and pledge all current and future SIB loan repayments to secure the
bonds issued.

States have the opportunity to learn from the experiences of South Carolina,
Minnesota, and Ohio as they evaluate options to enhance SIB capitalization
to meet loan demands. The SRF experience also provides useful insights for
maximizing a SIB's potential through bonding. The Florida DOT currently is
evaluating the leveraging of its SIB. In many states, the lack of legislative
authorization has been the primary barrier to SIB bonding. Additional capitalization
though an expansion of the SIB pilot program would provide an asset base
to increase loan resources through leveraging to meet surface transportation
infrastructure needs.

SRF Leveraging
July 1, 1987 through June 30, 2001
(Dollars in Millions)

GARVEE Roundup

GARVEE Activity Jumps to $2.7 Billion

Since January 2002, four new Grant Anticipation Revenue Vehicle (GARVEE)
bond issues have been brought to market, including the first issue for Alabama
(highlighted on the following page).

In July, Arkansas issued $215 million of GARVEEs,
the third and final issue in its $575 million program to accelerate Interstate
reconstruction. These monies are enabling the rebuilding of 380 miles
or 60 percent of Arkansas's Interstate system.

Ohio sold its fourth and largest GARVEE issue of $135
million in September, bringing the total amount of bonds issued to $225
million. Ohio's GARVEE issues are facilitating the advancement of three
major infrastructure improvement initiatives: the Spring-Sandusky Interchange,
the Maumee River Bridge, and the Southeast Ohio Plan. Ohio was the first
state to leverage Federal dollars through GARVEEs.

Colorado's $208.3 million issue in June brought its
GARVEE total to $1.25 billion, accounting for 47 percent of the GARVEEs
issued nationally to date. Colorado is accelerating construction of 28
priority transportation corridor projects with an estimated cost of nearly
$5 billion with the proceeds of its GARVEEs. This strategic initiative
includes advancing the $1.7 billion multimodal Southeast Corridor project
(T-REX) with $0.7 billion of GARVEE funding.

Also of note is Colorado's recent refunding GARVEE bond issue (designated
as TRANS). In August, the Colorado Department of Transportation (CDOT) sold
a $400 million refunding bond issue. The proceeds will be used to advance
refund a portion of the 2000 and 2001 GARVEE series, reducing annual interest
costs.

GARVEE Transactions
As of September 2002

State

Date of Issue

Face Amount of Issue

Ratings (Moody's/S&P/Fitch)

Projects Financed

Backstop

New Mexico

Sept-98
Feb-01

$100.2 Million
$18.5 Million

A3/A-/na
A2/A/na

New Mexico SR 44

No backstop;
Bond insurance obtained.

Ohio

May-98
Aug-99
Sep-01
Sep-02

$70 Million
$20 Million
$100 Million
$135 Million

Aa3/AA-/AA-
Aa3/AA-/AA-
Aa3/AA/AA-
Aa3/AA/AA-

Various projects including: Spring-Sandusky and Maumee river improvements

Moral Obligation pledge to use state gas tax funds and seek general
fund appropriations in the event of Federal shortfall.

Arkansas

Mar-00
Jul-01
Jul-02

$175 Million
$185 Million
$215 Million

Aa2/AA/na
Aa2/AA/na
Aa2/AA/na

Interstate Highways

Full faith and credit of state, plus state motor fuel taxes.

Colorado

May-00
Apr-01
Jun-02

$537 Million
$506.4 Million
208.3 Million

Aa3/AA/AA
Aa3/AA/AA
Aa3/AA/AA

Any project financed wholly or in part by Federal funds

Federal highway funds as allocated annually by CDOT;
Other state funds.

Arizona

Jun-00
May-01

$39.4 Million
$142.9 Million

Aa3/AA-/AA-
Aa3/AA-/AA-

Maricopa freeway project

Certain sub-account transfers.

Alabama

Apr-02

$200 Million

Aa3/A/na

County Bridge Program

All Federal construction reimbursements. Also insured.

TOTAL

$2,651.7 Million

Louisiana Passes GARVEE Legislation

In June, Louisiana enacted legislation (SB 80) authorizing the state to
issue GARVEEs. SB 80, signed into law by the Governor on June 25, 2002, allows
the State Bond Commission to issue revenue bonds secured by a pledge of Federal
transportation funds, state matching funds, and other revenues. The aggregate
amount of principal and interest on all bonds issued is limited to 10 percent
of annual Federal highway funding. The bonds will be used to finance the
accelerated construction of certain state transportation projects.

Contact: Jennifer Mayer, FHWA Western Resource Center, 415/744-2634.

Alabama GARVEE Bond Program Enhances School Bus Safety

In April 2000, the Governor of Alabama proposed selling bonds to raise
money to replace some 1,600 county bridges that were weight-restricted and
could not be used for school bus traffic. The situation created extensive
and costly detours around the weight-restricted bridges. The Governor's plan
involved borrowing against future Federal bridge rehabilitation funds in
order to accelerate bridge replacement projects across the state.

A month later, the Alabama Legislature approved the bond sale contingent
on a constitutional amendment for selling $50 million of general obligation
bonds to raise money for the local matching share. This constitutional amendment
required approval by the state's voters. In November 2000, voters approved
the constitutional amendment and the bridge rehabilitation program began.

The $250 million program ($50 million of general obligation bonds for the
non-Federal share plus $200 million of GARVEE bonds for the Federal share)
will replace approximately 1,300 county bridges in all 67 counties statewide.
The state's general obligation bonds were sold in November 2001, and the
GARVEEs were sold in April 2002 on a competitive basis. The GARVEE issue
was rated A by Standard & Poor's, and achieved a total interest cost
of just over 4.65 percent. The first three GARVEE funded projects were approved
for advance construction in December 2000, and currently there are about
$68 million of advance construction projects underway. Further details about
the issue are presented in the table below.

GARVEE "Questions
of the Quarter"

Each issue of IFQ features questions and answers
on the GARVEE program. This issue addresses the treatment of GARVEE debt
service in state plans. Note that answers to these questions are not regulatory
or legislative, but represent Federal Highway Administration's (FHWA)
current administrative interpretations. If you have questions or want
to confirm any of this information, please contact your local FHWA Division
office. GARVEE guidance is also available at:

To comply with the intent of the fiscally constrained planning process,
the Federal share of the debt-related costs (e.g., interest and principal
payments, associated issuance costs, and ongoing debt servicing expenses)
anticipated to be reimbursed with Federal-aid funds over the life of the
bonds should be designated as advance construction (AC). The planned amount
of Federal-aid reimbursement for debt service (AC conversion) should be
included in the State Transportation Improvement Program (STIP) in accordance
with FHWA procedures relating to STIP preparation.

How Should GARVEE Debt Service Appear on the Long-Range
Plan ?

The full cost of planned GARVEE projects (including interest costs)
should appear on the Long-Range Plan.

Technical Corner

Shadow Tolling the Broward Arena Ramps

A Study in Public/Private Partnerships

Public/private partnerships are an increasingly popular method of financing
transportation projects that benefit both the general public and the private
sector. While there are various forms of public/private partnerships, the
agreements generally provide for a segregation of financial and operational
responsibility between the public and private sectors to facilitate the completion
of a project. This segregation of responsibility leverages some of the risk
associated with constructing, operating, and maintaining a facility from
the public sector to the private sector. An example of a successful public/private
partnership is the use of shadow tolling in the agreement between Florida's
Turnpike Enterprise (the "Turnpike"), Broward County (the "County"),
and the Arena Operating Co., Ltd. and the Arena Development Co., Ltd. (together
as the "Operator/Developer").

In 1997, the County and the Operator/Developer requested that the Turnpike
build an interchange on the Sawgrass Expressway, one of the toll facilities
owned and operated by the Turnpike. The interchange would provide expressway
access to a proposed multi-purpose sports and entertainment complex situated
adjacent to the Sawgrass Expressway. Use of the expressway would alleviate
the expected high volumes of traffic on local roads during arena events.
In addition, the interchange would allow for controlled access entering and
exiting the arena. Based on the request, the Turnpike assessed the economic
viability of the interchange to determine that a specific transportation
need would be met and would be supported by the local community. In addition,
the project had to meet state environmental impact restrictions. Finally,
the projected costs of the construction, maintenance, and operation of the
interchange had to be compared to the expected revenues to evaluate the costs
and benefits of the interchange. Based on the results of the analysis, the
Turnpike concluded that despite the need, local support, and environmental
feasibility of the project, the costs of constructing, operating, and maintaining
the interchange significantly exceeded the expected revenues.

Since the projected cash flows did not support the Turnpike constructing
the interchange on a standalone basis, the Turnpike, the County, and the
Operator/Developer entered into an agreement in which the Turnpike provided
the $10 million capital outlay for the construction of the interchange. The
terms of the agreement require the Operator/Developer to remit annual payments
to the Turnpike for the imputed debt service (calculated by amortizing $10
million over 30 years at 5.91 percent interest) and the operating and maintenance
costs ($47,700 in the initial year with a three percent annual increase),
net of gross toll revenue collected from traffic entering the arena during
events and from traffic exiting the arena during non-event periods. Since
tolls are suspended for a specified period of time at the completion of an
arena event, the Turnpike requires the Operator/Developer to pay a shadow
toll equal to the lost revenue. Shadow tolls are tolls paid to the facility
operator by someone other than the facility user.

The shadow tolls at the Broward Arena are assessed to the Operator/Developer
based on a manual count of vehicles exiting the arena factored by the toll
rate that would normally be collected at the toll plaza. The use of shadow
tolls has a number of advantages. One of the main advantages is the transfer
of traffic risk from the Turnpike to the Operator/Developer. Since the collection
of tolls at the conclusion of an event would unnecessarily congest the traffic
exiting the arena, it poses a safety risk normally borne by the Turnpike
as operator of the toll facility. The use of shadow tolls, however, alleviates
the traffic risk to the Turnpike, without the negative financial impact of
a toll suspension. Another advantage of the shadow toll is the perceived
benefit to the facility users. Patrons of the arena perceive the toll suspension
as a benefit to attending the arena events. As such, the patron's perception
also benefits the Operator/Developer in the form of increased attendance
at arena events. Due in part to the ease with which patrons can access the
arena, attendance at events is positively impacted.

Total traffic volume on the interchange has nearly doubled since the first
full year of operation, and for the year ended June 30, 2002 was approximately
570,000. Despite the increased use of the interchange, toll revenue has not
been sufficient to fund the required annual payment of the Operator/Developer.
As such, the Turnpike bills the Operator/Developer for the annual shortfall
amount based on the agreement provisions. The success of the public/private
partnership between the Turnpike, Broward County, and the Operator/Developer
underscores the fact that public projects that benefit private interests
can be successfully developed and financed in order to mitigate risks associated
with a project as well as to pool needed resources.

As cash flow limitations continue to require the public sector to seek
innovative ways to finance needed transportation projects, opportunities
for strategic alliances in the form of public/private partnerships will increase.
For transportation projects, these alliances may utilize shadow tolling in
order to leverage the risks of financial and operational responsibility between
public and private sectors.

Tolling Provisions Applicable to Federal-Aid Highways

The Federal-aid highway program, when created in 1916, did not allow the
use of Federal-aid funds on toll facilities. This position remained unchanged
until 1927 when Congress enacted legislation that permitted Federal-aid highway
funding to be used to construct toll bridges and approaches. Subsequent legislation
provided more flexibility on using Federal-aid highway funds for improvements
to toll facilities with the last significant changes being made in 1991 with
passage of the Intermodal Surface Transportation Efficiency Act.

Initial construction (except on the Interstate System) of toll highways,
bridges, and tunnels, including approaches to these facilities.

Reconstruction, resurfacing, restoration, and rehabilitation work on
existing toll facilities.

Reconstruction or replacement of free bridges or tunnels and conversion
to toll facilities.

Reconstruction of a free highway (except on the Interstate System) and
conversion to a toll facility.

Preliminary studies to determine the feasibility of the above toll construction
activities.

If Federal-aid funds are used for construction of, or improvements to,
a toll facility or the approach to a toll facility, or if a state plans to
reconstruct and convert a free highway, bridge, or tunnel previously constructed
with Federal-aid highway funds to a toll facility, a toll agreement is required
(see Title 23, United States Code, Section 129(a)(3)). The toll agreement
is executed between FHWA, the state DOT, and the toll authority.

The toll agreement must require that all toll revenues are first used for
any of the following: debt service; reasonable return on private investment;
and operation and maintenance, including reconstructing, resurfacing, restoring,
and rehabilitating work.

The agreement also may include a provision regarding toll revenues in excess
of those needed for the required uses outlined above. This provision would
allow these excess revenues to be used for highway and transit purposes authorized
under Title 23 if the state certifies annually that the toll facility is
being adequately maintained.

The issue of whether a toll facility is to become free when debt is retired
or at some other future point in time or whether tolls are to be continued
indefinitely is a matter to be determined by the state.

Decisions regarding the amount of tolls charged are made by the toll authority
subject to requirements under state and local laws and regulations. These
decisions require no review or input from FHWA.

Section 1216(b) of TEA-21 established a new pilot program to allow conversion
of a free Interstate highway to a toll facility in conjunction with needed
reconstruction or rehabilitation of the Interstate highway that only is possible
with the collection of tolls. The FHWA Headquarters issued a December 24,
1998 memorandum to its division offices soliciting candidate projects from
the states for this pilot. No candidates were submitted. The FHWA Headquarters
subsequently issued an April 6, 1999 memorandum to its division offices advising
them that the pilot program remained available to the states as an open-ended
solicitation and candidates would be accepted on a first-come basis.

FHWA published a report in February 1999 entitled Toll Facilities in the
United States (Publication No. FHWA-PL-99-011) which contains selected information
on United States toll facilities.

Other Tolling Resources

The International Bridge, Tunnel and Turnpike Association (IBTTA) maintains
an address directory of its membership and serves as an information clearinghouse
and research center. It also conducts surveys and studies and publishes a
variety of reports, statistics, and analyses. Their web site is located at http://www.ibtta.org.

The American Automobile Association (AAA) compiles a directory of toll
facilities containing such current information as rates, load limits, frequency
of service, etc. Their web site is located at http://www.aaa.com.

Events and
Resources

Innovative Finance Primer and Brochure Released

FHWA has published an innovative finance handbook, or "primer," and
companion brochure that highlight new approaches for bridging the funding
gap between transportation investment needs and financial resources. The
primer and brochure describe techniques advanced by FHWA in partnership with
the states, including innovative management of Federal funds, GARVEEs, and
credit assistance, such as SIBs and the TIFIA Federal credit program. Several
case studies illustrating how states have used these techniques to close
project financing gaps are highlighted in the primer. A list of resources
including publications, web sites, and expert technical assistance that can
help states and other project sponsors make use of these techniques also
is provided.

The primer and brochure are available at the FHWA innovative finance web
site:

http://www.fhwa.dot.gov/innovativefinance/ifp/

http://www.fhwa.dot.gov/innovativefinance/brochure/

Contact: Max Inman, FHWA, 202/366-0673.

FHWA Workshop Announcements

A FHWA workshop on project finance will be held in conjunction with the American
Road & Transportation Builders Association's (ARTBA) 14th Annual Conference
on Public-Private Ventures. The workshop and conference will be
held at the Four Points Sheraton in Washington, D.C., November 20-21, 2002
and will include sessions on best practices and lessons learned, TIFIA,
and future expansion of the innovative finance toolbox. The FHWA workshop
will launch the two-day program and is scheduled from 9:00 a.m. to noon
on November 20.

More information is available on the 2002 Public-Private Ventures Conference
web site at:

As part of the Transportation Research Board's (TRB) 82nd Annual
Meeting in Washington, D.C. from January 12-16, 2003, the TRB Committee
on Taxation and Finance and FHWA will co-sponsor a Transportation Finance
Workshop on Sunday, January 12. The workshop, which will be held from 1:30
p.m. to 5:00 p.m. at the Hilton Washington Hotel and Towers, Jefferson East
Room, will focus on new developments in innovative finance and the best
practice application of innovative tools and techniques, including an outlook
for the future.

More information is available on the TRB 82nd Annual Meeting web site at:

http://www4.trb.org/trb/annual.nsf

Contact: Mary Kissi, TRB, 202/334-3177.

New Team Member Joins the Southern Resource Center

The Southern Resource Center is pleased to announce that Jim Hatter (fondly
known as the Mad Hatter for his creativity and resourcefulness) has joined
the SRC Finance Team as an Innovative Finance Specialist. The SRC spirited
Jim away from a private sector firm in sunny California. He is enjoying North
Georgia's refreshing climate, low real estate prices, and less harried commutes.

Jim has 27 years of municipal finance experience, including 10 years in
the public sector. As an investment banker, Jim has financed hundreds of
infrastructure projects with a wide variety of tax-exempt and taxable instruments,
including general obligation bonds, industrial development revenue bonds,
enterprise revenue bonds, pool revenue bonds, special tax bonds, grant and
loan anticipation notes, and tax and revenue anticipation notes. While serving
in the public sector, he used loan guarantees, bonds, leases, loan anticipation
notes, and grant anticipation notes to advance Federal and California state
programs supporting municipal infrastructure.

He is a graduate of California State University, Fresno with both Bachelor's
and Master's degrees. Over the next several months, Jim is planning to meet
with Division and state personnel throughout the south, southwest, and east.
He is planning this "grand tour" to obtain a better understanding
of customer needs and issues, thereby assisting the SRC Finance Team in its
continuing efforts to meet (and exceed!) customer expectations.

Please join us in welcoming Jim to the FHWA Finance Team. Jim can be reached
at 404/562-3929.

New Project Finance Institute Workshop Offered

The American Association of State Highway and Transportation Officials
(AASHTO) in conjunction with the University of Southern California (USC)
and with support from the U.S. DOT have established a Project Finance Institute.
The Institute is offering Professional Development Workshops on project finance,
exploring policy issues and cutting edge practices relating the development
and financing of major transportation projects and programs.

The two-and-one-half-day inaugural workshop was held in Los Angeles, California,
at USC's School of Policy, Planning & Development, May 13-15, 2002. With
the additional sponsorship of TRB, a second workshop will be held at TRB's
building at 500 5th Street, N.W., Washington, D.C. from December 9-11, 2002.
The December workshop will teach participants how to:

Determine when and under what circumstances partnerships with private
sector entities may be appropriate;

Explore the role of the capital markets and the determinants of investor
demand for infrastructure securities; and

Design plans of finance that incorporate various layers of public and
private funding.

The workshop is designed for public and private sector transportation professionals
and draws upon distinguished USC faculty and leading industry practitioners
to ensure academic excellence and professional relevance. The workshop format
involves a combination of lecture and case study, with an emphasis on classroom
discussion, drawing upon participants' professional experiences.